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Monday, July 9, 2018

Crypto vs. Forex Strategies...

The forex market is old, dating way back to the late 19th century. The cryptocurrency market, on the other hand, is a recent phenomenon and, unlike forex, has new coins entering the fray at regular intervals. The crypto world is neither affected by country-specific, geo-political issues nor macro-economic factors, because of its decentralised nature. This calls for a different approach to trading these instruments.

However, long-term and short-term trading strategies, along with arbitrage, are applicable in both cases. Each market has its own set of advantages and disadvantages for traders too.

Market Capitalisation
It is important to understand the nature of both markets before trading. The forex market remains the largest and most liquid market in the world. The average daily turnover in 2016 was approximately $5 trillion. It also has greater depth and stability, compared to the cryptocurrency market, due to its larger size.

In comparison, the cryptocurrency market is smaller, standing at $245 million as of June 28 2018. Moreover, most of the coins are available in limited supply. The price of crypto coins is determined largely by the demand-supply ratio.

These factors have to be kept in mind when we look at trading strategies.

High Volatility
The crypto market has highly volatile instruments. Random rumours and speculations drive price movements. In contrast, the forex markets show stability, and lower periods of volatility. You can expect 20% to 30% fluctuation in the crypto exchange rate in a day, which makes leveraged
trading a rare feature. However, higher volatility also means higher chances of profits, sometimes at unprecedented levels. This is why many short-term traders resort to cryptocurrency trading, since they get plenty of opportunities to get in and out of the market. In contrast, the amount of profit that could be made in the forex market is lower.

In either way, stop loss and other risk management techniques have to be used for both types of trading.

Cryptocurrency Exchange Rates Differ from the Actual Value
The exchange rates of cryptocurrencies can differ slightly from their actual value, unlike fiat currencies. Also, given that these are digital assets, they need to be stored on software or hardware wallets. Traders often prefer to store their crypto assets in exchange wallets. The problem, however, is that these wallets have proven to be vulnerable to hacking and theft.

Fortunately, leading brokers like Blackwell Global, are providing various means of crypto trading, like CFDs, where traders don’t actually own the underlying asset, but simply speculate on the price. CFD trading allows traders to take positions in both rising and falling markets. This is highly useful in trading in a highly volatile cryptocurrency market.

24/7 Crypto Trading
Cryptocurrencies can be traded 24/7. In contrast, forex markets close at the weekends. With robust trading platforms like MT4, one can trade in various crypto coins, with useful crypto indicators available to help determine the price action and assist in identifying buying and selling points. You can always choose a demo account to try different strategies in real market conditions, but without using any real assets for trading.

With the rise of blockchain applications, trading in cryptocurrencies is only expected to become increasingly lucrative. Many forex brokers have now included crypto offerings in their product portfolios, so that traders can benefit from the soaring prices of alt coins. Blackwell Global, a leading FCA-regulated broker, has introduced the largest-ever crypto CFD offering, with over 15 different coins to trade via a single account, along with forex and commodities. To know more, visit Blackwell Global.